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Sydney and Melbourne are pulling Australia’s housing market lower, with both cities recording further price falls in May as growth slowed across much of the country.
Cotality’s national Home Value Index was flat for the month, while Westpac said the eight-capital-city index dipped 0.1% after earlier results were revised lower. Price growth across the capitals was flat over the three months to May, the weakest result since February 2025, while annual growth eased to 7.8%.
Sydney recorded the sharpest monthly fall, with dwelling values down 0.9% in May and now 2.1% below their cyclical high in November last year. Melbourne values fell 0.8% and are now 2.9% below their November peak. The ACT also declined, with values down 0.2%.
Other capitals continued to rise, though the pace of growth is slowing. Perth and Darwin recorded the strongest monthly gains at 1.5%, followed by Brisbane and Hobart at 0.9%. Adelaide values rose 0.5%.
“While the speed of value change remains very different from city to city, the direction is becoming more consistent, with most markets losing momentum as demand-side headwinds intensify,” Cotality research director Tim Lawless said.
Still, the broader pattern is becoming more consistent. Cotality said most markets are now losing momentum as demand-side pressures build. Westpac head of Australian macro-forecasting Matthew Hassan said Sydney and Melbourne were already in a deeper correction, while slower growth was becoming more visible in other capitals.
“The May data shows a more pronounced slowdown starting to emerge in other capital cities. That said, divergences remain wide—while a quarter of the detailed sub-markets covered saw prices decline in May, a similar share saw prices rise by over 0.6%mth, an annualised pace of around 7.5%yr,” Hassan said.
Cotality said the slowdown had been developing before the latest interest rate rise, the escalation of conflict in Iran, and taxation changes announced in the federal budget. Most cities reached their strongest pace of growth in spring last year, before affordability pressures and borrowing constraints weighed more heavily on demand.
Hassan said the slowdown so far had mostly reflected the February and March rate rises and uncertainty around the Middle East conflict. The RBA’s May rate rise and federal budget tax changes may have had some impact, he said, but are likely to be felt more in the months ahead.
The softer conditions are also showing in sales activity. Cotality estimated that national home sales over the past three months were 2.2% lower than a year earlier and 4.1% below the five-year average.
The largest falls were again in Sydney and Melbourne, where estimated sales were down 17.0% and 14.2% respectively from a year ago.
“These are also the cities where advertised supply has risen to above average levels, providing more choice and better leverage for buyers,” Lawless said.
Selling conditions weakened further in May. Cotality said the weighted average clearance rate across the capitals was close to 50% through the second half of the month, while listings were rising across most markets.
Westpac said auction results in Sydney and Melbourne deteriorated during the month, with clearance rates moving further below average and pre-auction withdrawals remaining well above average. Hassan said both indicators pointed to price corrections continuing into June, although low auction volumes made the figures less useful as guides for other capital city markets.
The slowdown remains most visible at the upper end of the market, though weakness is no longer limited to more expensive homes. Cotality said lower-quartile houses in Sydney and Melbourne are now also recording falls, along with lower-quartile houses and units in Canberra.
Westpac said houses have slowed more sharply than units since late last year. Across the capital cities, top-tier dwelling prices fell 0.6% in both April and May, while middle- and lower-priced segments still recorded small gains.
Regional markets also remained firmer than the capitals, with combined regional dwelling values rising 0.6% in May. However, Cotality said this was the smallest monthly increase in a year, suggesting regional growth is also easing.
All broad rest-of-state markets still recorded positive growth. Regional Western Australia led the gains with a 1.9% monthly rise, while regional New South Wales posted the smallest increase at 0.2%.
